Rob van den Dam
24 September, 2008

European Communications

Only a few years ago startups such as Skype and VoiceBuster gave the telecom industry a real scare by allowing people to make telephone calls over the Internet free of charge. They forced telecom operators to cannibalize their traditional voice revenues with VoIP services. It was one of the reasons for the telcos to start investing in IPTV. Now there is a new threat for the telcos in the form of Internet TV. Will new players again traumatize the telecom industry by undermining the telcos nascent IPTV services?

Many telecom operators are investing in digital content in the hope of offsetting the fall in fixed-voice revenues. They focus primarily on offering television and video services, in particular IPTV; many of them see this as a necessity to combat the trend of losing subscribers to cable companies, which are increasingly offering VoIP as part of triple-play bundles.

But new Internet developments again pose a threat to telecom operators. The Internet has already caused a transformation in the telecom industry in the domain of communication services, where new players such as Skype have forced telecom companies to offer VoIP at substantially lower prices than they previously offered for traditional voice services over the fixed network. And now, the Internet enables Internet-TV start-ups to become a threat for the telcos nascent IPTV-services.

Today Internet video is still delivered in rather low quality via sites like YouTube. In spite of grainy images and the small window format, however, these sites have been successful in attracting millions of viewers on a regular basis. And as broadband becomes faster and available to a broader public, they will be able to offer professional video services with a continually improving image quality, in this way providing an alternative for IPTV.

IPTV is a system where video content is transmitted in the form of IP-data packages over a closed secure network. The infrastructure is configured such that viewers can only receive the IPTV provider's own TV-channels. IPTV focuses primarily on the TV-set in the living room, generally a wide-screen TV with high image quality. A Set Top Box (STP) is required to receive the signal. IPTV telecom operators are very uniquely placed to enhance the television experience:

§ They can augment their IPTV-offerings with a wide variety of voice and

§ data services.

§ They are well placed to combine IPTV on the TV with the other screens:

§ the PC and the mobile.

§ They also have a lot of information about the viewer that they can use

§ to deliver personalised content and advertising.

§ And last, but certainly not least, they are able to guarantee a qualitative

§ high end-to-end television experience.

Currently most IPTV-services are based on subscriptions and a Video-on-Demand charge.

Up to now, many IPTV operators have focused on offering the same services - the same TV-channels and type of content - that their competitors, usually the cable companies, offer. But some telcos have taken it further. For example, Belgacom in Belgium is competing primarily on exclusive sports content.